- We maintain BUY on Jaya Tiasa, but with a lower fair value of RM2.40/share, based on a PE of 20x on a downward revised FY15F EPS – following adjustments to our CPO and log assumptions.
- Jaya Tiasa posted a 1QFY15F core net profit of RM26mil (+78% QoQ, 10% YoY) – in line with consensus and representing 21% of estimate. No dividend was declared for the quarter.
- The earnings were however below our forecast largely due to our earlier and much higher CPO price assumption of RM2,600/tonne, which straddles over both CY15 and CY16.
- Following the result, we have cut our FY15F earnings by 25% after slashing our CPO price to RM2,300/tonne and cutting FFB output by 8% to 900,000 tonnes (from 980,000 tonnes previously) based on a yield of 15.8% (vs. 17.8% projected previously and FY13’s 13.8%).
- Notably, for 1QFY15, the oil palm division posted an est. EBIT of RM16.4mil (-15% QoQ, +42% YoY) and PBT of RM14.2mil (+13% QoQ, +48% YoY) in spite of CPO selling prices averaging only RM2,194/tonne. OER improved further to 18.3%.
- This, we believe, is a clear sign of the significant impact to its bottom line that could be had from a slight uptick in its FFB output yield. We believe the yield would likely show significant improvements from FY16F onwards. Conservatively, we now project the yield to improve to 17.4% and 18.4% for FY16F and FY17F, respectively.
- For FY15F, output may have peaked in 1Q, hitting a historical high of 91,000 tonnes in Aug 2014. We believe the FY16F monthly average could hit close to that – given that the average tends to lean towards the previous year’s peak.
- Our strong BUY conviction remains, based on the fast rising percentage of oil palm hectarage reaching prime maturity over the next two years. The prime mature hectarage will reach 33%, 50% and 62% of the planted area by FY15F, FY16F, and FY17F respectively, vs. just 23% for FY14.
- Simultaneously, we have also upped our log ASP assumption to ~US$203/cu m (from just US$184/cu m previously) based on the strong demand from India. But we have cut our log sales assumption by 12.5% to 525,000 cu m based on 1QFY15 numbers.
- Jaya Tiasa too is a prime beneficiary of any upward trend in CPO prices. BUY for its high growth prospects, which remain intact.
Source: AmeSecurities
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